Stake Ventures

So why do people use checks?

• Is there any other way to pay?
• Habit
• Intentional delays – Hopefully by the time he receives the check, the check I just received will have cleared.
• Float – earn interest on the money until the victim/supplier is able to clear it.
• My accountant told me to do so
• There is not an easy way to send payments electronically in the US
• It is the cheapest option

Alternatives?

PayPal and ACH transfers are the best alternative for US businesses. For international transactions PayPal is good if it’s available in the recipients country, otherwise SWIFT transfers are available all over the world. If you are worried about cost, ask the payee if he’d be willing to go 50%/50%.

ACH is only good within the US but is a fairly cheap option. ACH is the network that is normally used for payroll, but it is actually also the backend network used for clearing of checks, so it really is very economical. The downside is that there may be a day or two’s clearing of funds. Ask your bank how to do it. I believe most banks should be able to offer it. My bank Wells Fargo sent me a RSA Secure ID to be able to do ACH payment, which they call DirectPay. To send someone money this way all you need is the name, ABA number and account number of the recipients bank account.

PayPal has been around now for nearly 10 years and is a great option. It’s easy, it’s quick, it’s safe, it’s the Web 2.0 of money. Use it. The downside that the recipient may have to pay up to 2.9% transaction cost. I know personally I’ll happily absorb that cost for the convenience of not having to waste an hour going to the bank. A non obvious benefit with PayPal is that if you can use your credit card and receive air miles, that potentially could add up.

Habit

Not an excuse, get over it.

Intentional delays

First of all the intentional delays might be fine for the struggling cash strapped startup juggling large faceless suppliers such as the phone company etc. However as a startup your core suppliers are likely to be various kinds of human resources such as programmers and designers who you work closely with. I think this is highly disrespectful. Freelancers are just as likely to be cash strapped as you are. The way to deal with this is to be honest with your suppliers.

While we all would like to be paid on time, we all live and understand the realities of being a startup. Give us a heads up with an estimated time of payment and we are probably happier than hearing the “check is in the mail” defense for the 10th time.

Float

This is also an intentional delay and a really stupid one for most startups. Unless you are operating at the scale of a business like PayPal, the few dollars you make in extra interest is really not worth pissing off your suppliers.

My account told me to write checks

I’ve heard this over the years. Checks makes the accountants life easier. Seriously. That is just a load of cr*p. You already handle book keeping and receipts for all sorts of electronic transfers. Besides providing email receipts, PayPal and Banks have this innovative feature called a statement. It has all the information you or your account needs to match transactions with invoices.

As small businesses we often take everything our accountants and lawyers say as gospel, remember they are people just like us. They are however way more traditional thinking and less likely to question status quo, than your average founder of a revolutionary social web 2.0 startup. Question the advise they give you.

There is not an easy way to send payments electronically in the US

See the section on alternatives. There are 2 very good options that you probably already use for other things.

But checks are cheap

Firstly ACH payments are pretty cheap. I already mentioned that many suppliers are happy to absorb the extra transaction cost of paypal.

However checks are not cheap. Ok it might take you a few minutes to write one out and put it in an envelope. However think about the recipient. It costs me about an hours worth of lost earnings to go to my bank and deposit a check. That is a pretty heavy transaction cost for me.

Burn your check book!!

Just say no to the check option. There really is no excuse for you to pay people (yes suppliers are people too) by check. If you have been annoyed at some point having to go deposit a check, stop the cycle and don’t do it for your own suppliers. Almost every other aspect of our life is handled electronically and you as a visionary entrepreneur should know better.

Big mistake, and I really should have read the warning signs:

• No one at my local WellsFargo branch new about the WellsFargo HSA’s nor had even heard about them.
• The sign up process included printing out a pdf form, filling it out by hand and mailing it with a check.
• The HSA is part of some separate strange benefits subsidiary of WellsFargo

Well I guess I’m not one for heeding warning signs. The account opening process after mailing it was:

1. The check got cashed within a week
2. 2 weeks later I heard from them with a welcome letter
3. 1 week later I received a letter explaining their online account management system
4. On logging in (They have 2 separate systems with separate passwords) I found I had a $0 balance
5. Their system also identifies me as an employee of BlueCross of California???
6. I called them up to ask about this and they had no record of any payment
7. I gave them the information from the check they promised to investigate and call me
8. A week or so later the funds were there but no phone call
9. I finally received the VISA debit cards (for paying medical expenses) I’m guessing 5 weeks after the initial application

OK, so things are fine and dandy, they were a bit slow, but now we are in business right? I want to setup an automatic transfer from my bank account. That would seem to me as the most natural thing in the world with an HSA account.

I search through their site (http://wfhbs.com/shieldca/) and nothing. I find a form to send a check along to them and a form for them to automatically do direct deposit’s from my HSA in my bank account, but nothing about automatically depositing from my bank account to my HSA.

So I call them to ask how I do this. Unfortunately I’m informed that that I need to go to their site and download the pdf, print it out, fill it out in black ink and send it by mail with a check (every month).

I tell them surely that can’t be right in 2007. She says they are working on offering automatic deposits in 2008. I’m wondering does this mean that corporate customers have staffs of people employed downloading pdf forms, filling them out by hands and sending checks in the mail for each and every employee’s HSA account?

Anyway thankfully there is a hand pdf available on the site that I can download and fill out by hand and send by snail mail to roll my HSA account over to HSA Bank, who has a full online enrollment process. They claim I will receive my VISA cards within a week. I will be able to fund the account online within 2 days of my application and also setup regular monthly transfers.